Gold mine hits rich seam of Greek red tape

A planned Greek gold mine that would provide much-needed jobs and boost a local economy is being held up by needless red tape, according to the Australian miner trying to get the project started.

"Sapes gold project has got huge potential, massive, everyone in the business knows about it," says Jason Bontempo, the Australian MD of Glory Resources who has had to deal with more than two years of excessive bureaucracy and delays.

Glory Resources invested in a mine in Thrace in northern Greece back in 2011 and is still fighting to get the required environmental and mining licenses to drill. Mining for gold produces on average between 2-3 grams of gold per tonne. Bontempo believes the Sapes mine could produce approximately 20 grams per tonne.

Having already spent $25 million, Bontempo says "they are seeking to invest a further $150m on development and exploration and hope to initially create over $1billion in value for all stakeholders" based on current surveys of the gold underground.

The firm's latest feasibility study suggests it will take 20 months to make the mine functional, but Bontempo points out that construction, spending and jobs will be created in the region during that time.

He has also spent time getting to know the local community in Thrace where an estimated 70 percent are unemployed. He says many of them support the project, which he hopes could ultimately create up to 200 direct and further 600 indirect and affiliated jobs through-out the nine-year estimated lifetime of the mine. Bontempo believes it could last far longer.

While this is a tiny fraction of the 3 million unemployed across Greece, Bontempo argues this is exactly kind of growth and jobs opportunity the country should be encouraging.

Ever since Greece was first bailed out by the International Monetary Fund and its fellow euro countries in 2010, it has been implementing harsh spending cuts and tax hikes as a condition of its international loans. Austerity has put the brakes on the country's economy, it is currently in its sixth year of recession, and sent unemployment soaring.

In order to get the country back on its feet, Greece's international creditors have insisted that Greece reforms its economy to encourage foreign investors to set up business in the country.

Notis Mitarachi, deputy development minister told CNBC that "projects of environmental concern must comply with strict EU laws" and one hold-up may be concerns about the use of cyanide to extract gold from its ore.

However, Glory Resources doesn't need to use cyanide on the Sapes facility.

Politics also plays a key role. Since Glory Resources first invested, Greece has undergone two turbulent elections and more recently a splintering of the current coalition.

Bontempo feels he is caught in a power struggle with Thrace's local government while the central authorities have little incentive or political weight to help.

Mitarachi told CNBC that "as a democracy Greece always takes into account the view of regional governments and elected officials" when assessing investment requests.

Mitarachi said the system is now up and running and there had been a "40 percent increase in private investment through the Ministry" who can deliver a decision on whether a project should go ahead within 30 days.

The Fast Track scheme wasn't available when Glory initially invested but it has subsequently tried to join -- and given up. Bontempo argues it is a waste of money.

Bontempo adds that he knows of other similar mining projects that have joined the fast track program and are facing delays.

Invest in Greece said in an emailed statement to CNBC that "the truth about the Fast Track Law is that it came into effect in 2010, and is an important part of the Greek governments' commitment to creating a friendly environment for investors by creating a set of stable and transparent investment rules, procedures and administrative structures for the implementation of large scale public and private projects

"Once included in the scheme, the time-frame depends on a number of factors, including the nature of the investment and the necessary licenses that need to be obtained; and how far along the licensing process the investor was before being included in the Fast Track.

"It is important to note that, although inclusion in the scheme does not guarantee that a license will be granted, nor can it change the specific licenses required in order to realize that particular investment, it does ensure the speeding up of the licensing process, and hence translates to clear and significant profits for the investor.

In relation to Glory Resources, Invest in Greece said that it had "met with representatives of Glory Resources on several occasions in the last two years to discuss their investment project and as they were considering their inclusion. The company has never submitted for inclusion to the Fast Track scheme."

Invest in Greece

With the Troika of Greece's international debt inspectors– from the IMF, European Commission and the European Central Bank -- back in Athens, there has also been renewed focus on the country's failure to meet its economic reform targets and its privatization program.

Notis defends the program saying "people need to realise that there was a lot of legal work to be done, a regulatory authority and a framework that is now in place".

The government website Invest in Greece lists testimonials from the likes of Microsoft, Deutsche Telekom, Hochtief and GE. In September alone, they announced that Chinese giant ZTE Corporation is to construct a logistics center in Piraeus and also a separate 230 million euro deal with China's Cosco.

Invest In Greece also pointed out to CNBC that 'just this week, the positive evaluation of two new investment projects for the development of integrated tourist resorts, plus an additional project, currently under evaluation by Invest in Greece, further diversify the mix of investment projects which are included in the Fast Track scheme.

" All in all, the interest of investors to be included in the Fast Track is a clear indication in the continued support and trust of prospective investors for the efficacy and reliability of the Fast Track process."

When CNBC spoke to Bontempo in Athens last week he was preparing for a visit by some of Glory's largest shareholders who collectively manage more than 380 billion euros. With some irony, he told us that the Greek development minister was currently in London presumably hoping to drum up similar kinds of interest.

Glory Resources is the only Public Listed junior company in the country right now, according to Bontempo who believes many other juniors and potential investors are watching Greece's handling of this closely as a test case.

One government official recently admitted to Bontempo that he couldn't call anyone at other relevant ministries to facilitate the process because it would look like he'd taken a bribe.

Foreign companies investing in Greece have sparked concerns that the country won't see any of the returns. Bontempo denies he is stealing Greece's crown jewels. "It will be a 60:40 split in terms of profits between the firm and the government when all levies, costs and taxes are included," he told CNBC.

After two years of waiting and little sense of when the Sapes project will be up and running, you have to wonder if Glory Resources has considered pulling the plug. Bontempo's response is emphatic.

"Well that point's not now… We have a strategy with building our local support, there's also going to be some interest in Thrace or regionally, regional and local elections happen in May, so we'll be watching that very closely," he said.

Breakthrough

Maybe the breakthrough will come sooner than he realises. On Thursday night the Greek Ministry of Environment, Energy and Climate Change Press Office told CNBC in an emailed statement:

"The Minister of Environment, Energy and Climate Change Yiannis Maniatis will call within the next 15 days a wide meeting with the participation of Glory Resources, local MPs, the local governor, mayors, as well as civil servants of the departments of the Ministry responsible for the mines, so that we can examine the issue in depth."

For now, the Ministry of Environment, Energy and Climate Change will not comment any further on the issue.